SCANDAL
Bre-X probes focus
on tampering, fraud
Claims and
counter-claims
Indonesia vows to
probe Busang fraud
November assays
showed problems
with samples
Investors seek tighter
regulations in wake
of fraud
Freeport demanded
answers before de
Guzman fell to his
death
Mutual funds see the
other shoe drop
Mining juniors hit by
market fallout
THE BRE-X ARCHIVE
Tuesday, May 6, 1997
Hasan: I relied on the
Canadian 'big boys'
By PETER MORTON
The Financial Post
JAKARTA -- How did so few fool so many for so long?
Bob Hasan says he does not have the answers. Nor should
he.
Instead, one of Indonesia's most powerful industrialists who
got swept up in the Bre-X story said he relied on the
Canadian "big boys" to tell him.
The big boys, said Hasan, who is a close personal friend of
Indonesian President Suharto and one of the key players in
the country, refer to Barrick Gold Corp. chairman Peter
Munk and Placer Dome Inc. chief executive John Willson.
When the hysteria of Bre-X was
near its peak, Canada's mining
giants decided they wanted a very
large piece of the Busang gold find,
thought to contain between 71
million and 200 million ounces of
gold.
Hasan insists he knew nothing
about gold but was only a
businessman.
"I'm just an amateur," he said. "But
the big boys came here to have lunch with me."
That was during the struggle over the winter to sort out who
would own and operate the Busang II mining operation, since
clearly Bre-X would not be able to handle such a massive
undertaking.
Hasan said Munk in particular overplayed his hand. He
brought in heavyweights like former U.S. president George
Bush and former Canadian prime minister Brian Mulroney to
lobby Suharto in a bid to cut out local partners.
"We were not asked until the last moment," he said.
Hasan said he considered asking Teck Corp. chief executive
Norm Keevil for the needed assistance, but a couple of things
changed his mind.
First was the importance of showing Indonesia could prove it
played by international rules. "When we do business here, we
have to do it in a way that's proper," he said.
Internally, the Indonesian government had been having
problems with foreign investors dealing less than delicately
with sensitive Indonesian needs.
A national election is now under way and there has been
loud criticism of the government's handling of resource
management.
The last thing the government needed, Hasan said, was
another foreigner coming in to develop what could have been
Indonesia's most important reserves.
So he turned to Jim Bob Moffett, a no-nonsense man who,
as chairman of New Orleans-based Freeport-McMoRan
Copper & Gold Inc., had had 30 years' experience in dealing
in Indonesia. Freeport-McMoran was to have 15% of the
find for raising the needed capital and operating the mine.
"They knew how to handle themselves locally," he said.
(Freeport's predecessor, Moa Bay, had mined nickel in
Cuba until its property was expropriated by Cuban president
Fidel Castro. That property is now operated by
Toronto-based Sherritt International Corp.)
Initially, Hasan said Moffett was not interested since he was
deeply involved in the company's own gold play on the island
of Irian Jaya.
"I had to twist his arm a little bit," Hasan said.
Moffett, apparently already suspicious of the extraordinary
assay results, immediately flew in a drilling team to the Busang
site, drilling holes adjacent to those Bre-X claimed contained
so much gold.
Under tight Indonesian security, Moffett flew drilling samples
to New Orleans where two different tests were done --
cyanide and firing -- to get independent samples.
Hasan said he got the call from Moffett while he was at a
soccer game in Turin, Italy -- "I think Sweden was playing" --
and was told there was insignificant gold and that the partners
should withdraw.
Hasan insisted he knows little about Bre-X and its
executives, including chairman David Walsh and chief
geologist John Felderhof.
"I met Felderhof once, Walsh once," he said. "I never
stepped into Bre-X's offices [in Jakarta]."
Not surprisingly, Hasan downplays reports of Suharto family
fighting over Busang, and he laughs off suggestions he took
advantage of the Freeport-McMoRan results to load up on
cheap Bre-X shares.
"I never bought any shares," he said. "I don't need the
money. I eat three meals a day, swim every day, play golf
every day."
At best, he was building a legacy, hoping the billions of
dollars a Bre-X Busang brought in would create a foundation
for the future along the lines of the Rockefeller or Ford
foundations. Both philanthropic organizations were built from
the vast fortunes of American industrialists.
Yet in the end, said Hasan, no one got much of anything.
"Sometimes things go up, sometimes they go down."
Although he is loath to say so publicly, he has little doubt
now what this was all about -- a stock scam that went way
over the top.
For now, Indonesia is content to let the U.S. Securities &
Exchange Commission and the Ontario Securities
Commission launch their own probes, he said.
And Indonesia will likely bring in tougher new rules to ensure
assay results cannot be as easily manipulated. "Because of
this problem, the government will try to protect investors," he
said.
He predicts small mining companies will have many problems
in raising new capital for exploration in Indonesia but that
"business will go on."
And, in a strange way, he said, there may even be a bright
side to the Bre-X calamity.
"Everybody in Canada knows where Indonesia is," he said.
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